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Morning Commentary

Investor Indifference?
By Charles Payne, CEO & Principal Analyst
5/24/2017 9:45 AM

It was yet another solid, but not a spectacular session on Tuesday for the market. It opened higher but it couldn’t gain traction, but it fought off a few half-hearted pullback attempts.

S&P 500

Dow Jones Industrial

NASDAQ

Crude

+4.40

+43.08

+5.99

+$0.34

2,398

20,937

6,138

$51.47

Although stocks regained their collective footing, it’s clear there were two dynamics at work with an upside bias that has run into a serious wall of resistance; a catalyst and an uptick in volume. 

Despite the market’s resolve, it appears individual investors have begun to throw in the towel.  According to the American Association of Individual Investors, bullish sentiment just hit a 2017 low on May 18, the day after the 373-point drubbing for the Dow Jones Industrial Average.

Sentiment Trends

Current

Change

Historic

Bullish

23.9

-8.9

38.5

Neutral

41.9

+4.8

31.0

Bearish

34.3

+4.0

30.5

 

However, it should be noted that the individual investor’s bullishness hit a recent high a couple of weeks after the election on November 24th as bearishness was hitting its lowest point.  While investors are more bearish, the real deal is uncertainty reflected in the spike in investors calling themselves neutral. 

This number without a doubt is a proxy for the Trump Economic Agenda, which seems to be in a near-term limbo.

Investing Trends

It also appears that many have sold in May (at least stocks) as investors dumped $7.0 billion in equity mutual funds while picking up $8.2 billion in taxable bonds this month. Even within the realm of equity mutual funds, U.S. investors continue to opt for funds earmarked for investments in businesses outside America.

Message of Market

Yesterday’s biggest winners were financials, led by regional banks in which I continue to believe are the most undervalued stocks in the market.  Of course, these banks continue to need regulatory reform just as much, if not more, as their larger brethren. 

With parts of the economic agenda bogged down, perhaps the administration can act toward regulatory reform, which the entire GOP could agree on, and swift action could have a more immediate impact on business and commerce.

The only losing sectors were consumer discretionary names weighed down by Walt Disney (DIS), Tiffany & Co. (TIF), and Ford Motor Company (F).

S&P 500 Index

Change

Consumer Discretionary (XLY)

-0.47%

Consumer Staples (XLP)

+0.08%

Energy (XLE)

+0.22%

Financials (XLF)

+0.77%

Health Care (XLV)

+0.31%

Industrials (XLI)

+0.17%

Materials (XLB)

+0.10%

Real Estate (XLRE)

+0.09%

Technology (XLK)

+0.07%

Utilities (XLU)

+0.19%

 

However, everything changes if major indices move to new highs, which could happen prior to the jobs report with an uptick in takeovers and mergers.  Yesterday, Bunge Ltd (BG) and Brown-Forman (BF) popped on scuttlebutt that they’ve been approached by suitors.

I continue to stress being long in a portfolio of great American companies, especially those that move earth and build factories and skyscrapers.

Today’s Session

Equities were generally higher all morning until Lowe’s and Tiffany posted earnings results that missed the market on significant declines in comparable stores sales. 

The market has entered a wait-and-see phase reflecting uncertainty over several key issues.  Most of this increasing angst is the result of unresolved issues in Washington, D.C.:

  • Waiting for conclusion of Trump foreign trip
  • Waiting for GOP to pass legislation 
  • Waiting for outcome of Russia probe

Today, we’ll get the CBO score on the House ACHA bill, which shouldn’t hold any surprises.  Although, there might be less deficit reduction, officially, fewer people are losing coverage (that all revolves around Medicaid reform). 

Market is holding up, but not breaking out, so we live with this basing pattern for the moment. 

 

 


Comments
Could it be that all the negative in the stock market is due to the "establishment" feeding negative data to the media, so they can bring down the President?

William Brown on 5/24/2017 1:46:30 PM
 

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